Google (NASDAQ:GOOG) is on tap to report earnings after the close today, so let's look at how expectations are shaping up.
According to Bloomberg, analysts expect Google to earn $6.43 per share on revenues ex-traffic acquisition costs of $12.25 billion.
Curiously, revenue estimates have been trending down since last quarter, while earnings estimates have trended higher, as you can see in these charts:
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Click to enlarge
For the fourth quarter reported on January 30, Google beat on revenues but missed on earnings.
However, the core Google ad business grew 22%, which drove a positive reaction, and the stock subsquently rose 8% before topping out on February 26.
Incidentally, that was when the iShares NASDAQ Biotechnology Index ETF (NASDAQ:IBB) started taking a dive, dragging most high-beta names down with it. Google dropped 16%, but the stock has rebounded hard off Tuesday's V-shaped bottom.
The most important thing investors need from Google is a strong performance in the core business.
Motorola, which has been a major financial drag because of heavy operating losses and sharp revenue declines, is coming off the books, so investors will be willing to look past the inevitable bad performance there.
Therefore, if you're looking to trade Google on the headlines numbers, approach with caution. For example, an earnings miss driven by the soon-to-be discontinued Motorola operation could result in a dip before a sharp snapback, assuming the ad business is strong.
On the commentary side, investors' focus should be on the usual topics like mobile ad monetization, YouTube, Android uptake, though the Google's also likely to talk about the Nest acquisition and Google Glass, which are more long-term initiatives.
Overall, with the stock's recent decline, I'd assume a decent amount of caution is built into the stock, which could result in a nice rally if Google at least meets expectations.
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